Monday, July 27, 2009

The Safest, Most Stable Country in the World to Buy

Also In Today’s Letter…

• FX 101: How Many Lots Should I Trade?

By Ashish Advani Ah! India – One of the most promising lands in today’s tumultuous business world.

I must caution you about my writings on India. Born in India and spending half of my life there, I tend to have rather strong views and ties to India. But at the same time, I also have many on-the-ground observations of India that you won’t hear about anywhere else.

So let’s roll the tape and sample the economic fare that India (and India’s currency, the rupee) presents…

India is one of the largest democracies in the world (1.2 billion people). And it’s a sea of tranquility compared to some of parts of Asia (including Sri Lanka, Pakistan, Nepal, Burma, China, Afghanistan, etc).

It’s also time-tested with India having gaining independence from Britain in 1947 (62 years). Since then, India has held regular elections (too many if I had a say) and each time the torch of power has passed hands without incident.

There has never been a threat to the democracy in that whole time. No military coups or dictators have even attempted to seize control. So if there is a safe, stable country to invest in which has full respect for the law, it’s India.

I should tell you I am really bullish on India so I have already started recommending specific investment recommendations to my paid subscribers.

India is a volatile market, but your capital is safe and it never under any serious confiscation threat. The same cannot be said about even China.

There was a significant event about two months ago that’s already shaping India’s asset on the world stage. The pro-business Congress Party won the election once again, but this time with an almost absolute majority. That’s a VERY good sign for the greater economy.

You could say that India just sent out a very bullish signal to the world that it was ready to break the shackles of partisan bickering and blaze a fiery trail to serious growth.

Not Recession Immune…
But On Its Way to Recovery Barring a Little Rain

Like the rest of the world, India has suffered the consequences of a global meltdown. It was not immune to the scare the world just faced. But it has continued to grow when the western world has gone into negative growth. India has recorded nearly 6% GDP growth per quarter in the last two quarters. It’s expected to at-least continue this growth pattern.

While the government has announced that it expects over 7% growth for the fiscal year 2009-10, it is not an edict like the Chinese Premier’s pronouncement. I am not as confident that India will hit this number, but growth will ensue, regardless.

I have reason to believe that the 7% plus growth could happen if India enjoys a good monsoon (rainy season) this year. You see, India is still dependent on agriculture for its overall growth, despite the reputation India now has as the call center capital of the world. Over 2.5% of its GDP growth comes from the agricultural sector (nearly 1/3rd).

The recent state of economic data over the past few months clearly spells out a story of solid, robust all round growth. The Industrial Production Index (IP) rose by 2.7% YoY (year over year) in May 2009. Consumer demand remained robust at a positive rate of between 2.5% to 2.,8% depending of which segment you quote within the overall growth.

IP Growth Story: (Numbers are YoY comparisons)

The growth story is alive and well in India. In fact, the growth story is so strong, that many economists are now predicting that the Indian Reserve Bank (RBI) will have to increase the core interest rate by early next year to begin to slow down a rapidly growing economy.

India does not suffer the “Export Dependence” disease afflicting the Chinese. India is significantly less dependent on exports for their growth. Also, India is miles ahead of China with its internal consumption aspects of its economy.

Despite the export industries of IT and Call Centers, India has a very healthy internal consumption rate and suffers less when U.S. and the rest of the Western world stops their imports.

In summary, the Green Shoots story is very well alive and kicking here in the land of Sages, IT and Oh yes, Basmati Rice and Curry. I recommend investments in India whole heartedly with one caveat – it’s highly volatile. So be prepared for a rollercoaster ride…

Yours in FX Profits,
Ashish Advani